Divergent business blog.
5 Fast Funding Options for Your Business to Grow & Scale Up
With the summer just around the corner, many business owners are seeking viable solutions and services to boost sales, stock up on inventory, hire additional staff or buy additional equipment to grow their business feasibly. But, how can organizations access the funds they need to fuel these growth efforts? With a range of options such as self-funding with retained earnings, borrowing from friends or family, getting an SBA (Small Business Administration) loan, crowdfunding via Kickstarter and Indiegogo, or taking an alternative loan – what’s your best bet?
Let’s explore the pros and cons of these 5 fast funding options in today’s market.
Self-Funding: Applying Earnings as a Primary Source of Funding
Most small to mid-sized businesses that are afloat and profitable have put earnings and profits aside; be it in a trust fund, savings fund or high interest investments, business owners have retained partial revenue and ROI from their sales, services and offering. With that, business operations demand overhead for manpower, operational space or office rent/lease expenses, outsourced services, supplies and more.
The potentially central drawback of self-funding growth with retained funds is truly sustainability. Nothing lasts forever, and savings or self-retained earnings reach their cap at some point. The question is will the revenue generated offer great ROI on use of retained earnings, or not? Hard to say.
The upside of this option is that using your own funds and generating business growth is rewarding, gratifying and eliminates paying back the loan or interest altogether.
Oil and Water Don’t Mix: Friends and Family For Funding – the Clash Between Convenience and Conflict
If someone wakes you up at 4am and asks you the following, what’s your default answer? “Do you really want to hear your uncle chasing you for 100k, and does your relationship stand at stake, despite the $0 interest incurred with a loan from him?” Most times, the answer is no I don’t want to deal with it, but sometimes, taking the risk of putting a family relationship or friendship at stake for business growth is a viable option with low financial risks.
If you trust the lender in your friends or family, the trust can be reinforced with repayment, leveraging well-earned respect for you from the lender. You can also prove your sense of responsibility friends, and your business flourishes, while potentially gaining a new partner or investor in a business that you may have overseen in the past.
SBA Loans: What They Are, How They Work – What’s in it For You?
SBA (Small Business Administration) Loans are partially government funded and guaranteed, offer lower risk and debt potential for the lending financial institution, (often banks), and lower borrower and lender risk. How? SBA loans offer a cushion to fall back on, as the government will support you and help pay back your loan if you. And while you’ve created debt, it’s less psychologically, emotionally and fiscally taxing, and can potentially generate great ROI for growth.
Crowdfunding Campaigns: At the Mercy of the Public’s Belief in Your Business
The growing trend of crowdfunding campaigns on platforms like Kickstarter and Indiegogo is an ideal way to increase brand awareness, sales and funding all in one. While your USP (Unique Sales Proposition) and added market value are subject to public evaluation and financial growth and contributor funding means time, marketing resources and energy, the benefits are noteworthy. Cutting edge companies are often the public’s preference when generously funding your cause.
But, if the public sees the added value in your offering, you double the rewards with increased brand awareness, leverage viral, online content generation that can create sales and upsell, and there are no loans to payback. The public is aware of where the funds go, you increase credibility with transparency, and the achievements are measurable, all perks and pluses.
Alternative Borrowing: Big Bucks, Big Interest, Bigger Debt or Biggest Growth Ahead?
Alternative lending is a viable option for businesses challenged by banks’ rigid loan requirements seeking expedited access to funds. Working capital lenders evaluate the expected revenue you’re expected to generate in future receivables, and are willing to issue funding in proportional size to them. Options like revenue based financing offer flexibility, as the repayment speed is based on the sales actually generated over the repayment period, as opposed to a fixed monthly sum.